Omega Navigation Enterprises, Q2 Results

Thursday, October 21, 2010

Omega Navigation Enterprises, Inc., a provider of global marine transportation services focusing on product tankers, announced its financial and operational results for the second quarter and six months ended June 30, 2010.

Second Quarter 2010 Results
For the quarter ended June 30, 2010, Omega Navigation reported total revenues of $19.0 million and Net Income of $2.4 million, or $0.15 per basic share, excluding losses on interest rate derivative instruments, incentive compensation grants expense and a one-time settlement fee for the termination of a purchase agreement. Including these items, the Company reported Net Loss of $0.9 million or $0.05 per basic share. Adjusted EBITDA for the second quarter of 2010 was $6.1 million. Please see below for a reconciliation of Adjusted EBITDA to Cash from Operating Activities.

The company fully owned and operated an average of eight product carriers during the second quarter of 2010, the same number as in the second quarter of 2009. In addition, in the second quarter of 2010, the Company has held and continues to hold a 50% interest in three double hull product / chemical tankers, namely the Omega Duke, the Megacore Honami and the Megacore Hibiscus, which are discussed in greater detail under "Recent Developments -- Fleet Development" below. The Omega Duke is accounted for by the equity method and is not consolidated in the Company's financial statements, while the Megacore Honami is reflected in the consolidated earnings. The results of the Megacore Honami will be deconsolidated in future quarters. The Omega King entered into a fixed rate time charter in the second quarter of 2010. Also, the Omega Queen, the Omega Prince and the Princess have been operating under floating rate time charters in the second quarter of 2010, with rates determined based on pools of similar vessels trading in the spot market. The Panamax vessels averaged $18,552 per vessel per day and the MR's averaged $16,686 per vessel per day (for each period net of voyage expenses) for the second quarter of 2010. In the second quarter of 2009, the Panamax vessels averaged $22,898 per vessel per day and the MR's averaged $19,083 per day per vessel (for each period net of voyage expenses).

Operating expenses for the company's MR product tankers averaged $5,169 per vessel per day in the second quarter of 2010, as compared to $5,304 per vessel per day in the second quarter of 2009. Operating expenses for the Company's Panamax product tankers averaged $5,158 per vessel per day in the second quarter of 2010, as compared to $5,735 per vessel per day in the second quarter of 2009.
Six Months 2010 Results

For the six months ended June 30, 2010, Omega Navigation reported total revenues of $34.4 million and Net Income of $4.5 million, or $0.28 per basic share excluding a loss on interest rate derivative instruments, non cash incentive compensation grants expense and a loss related to the termination of a purchase agreement. Including these items, Net loss was $0.4 million or $0.02 per share. Adjusted EBITDA for six months ended June 30, 2010 was $14.4 million. Please see below for a reconciliation of Adjusted EBITDA to Cash from Operating Activities.

Excluding profit sharing, the company's Panamax product carriers earned an average time-charter equivalent rate of $19,807 per vessel per day during the first six months of 2010, as compared to $23,692 per vessel per day (in each period net of voyage expenses), during the first six months of 2009. The company's Handymax product tankers earned an average time charter equivalent rate of $16,370 per vessel per day during the first six months of 2010, as compared to $19,910 per vessel per day (in each period net of voyage expenses) during the first six months of 2009.

Operating expenses for the company's MR product tankers averaged $5,241 per vessel per day in the first six months of 2010, as compared to $5,298 per vessel per day in the first six months of 2009. Operating expenses for the company's Panamax product tankers averaged $5,679 per vessel per day in the first six months of 2010, as compared to $5,957 per vessel per day in the first six months of 2009.
Recent Developments

Fleet Development
The company's current fleet includes 12 double hull product tankers with an aggregate carrying capacity of approximately 680,000 dwt. Eight of the vessels are wholly owned by the company and four of the vessels are owned through equal partnership joint ventures with a wholly owned subsidiary of Glencore International AG.
The company has previously announced that it has entered into an equal partnership joint venture named Megacore Shipping Ltd. with a wholly-owned subsidiary of Glencore International AG to acquire two 37,000 dwt Handysize double hull chemical / product tankers and seven Panamax double hull product tankers to be constructed at Hyundai Mipo Dockyard in South Korea. The two Handysize vessels, the Megacore Honami and the Megacore Hibiscus, were delivered in February and May 2010, respectively, to companies owned by Megacore Shipping Ltd. One LR1 Panamax tanker is expected to be delivered in October 2010. Four Panamax vessels are scheduled for delivery in 2011 and two Panamax vessels are scheduled for delivery in 2012.

The construction and acquisition of the remaining seven LR1 newbuildings, owned by Megacore Shipping Ltd, that are currently under construction are funded by debt and equity contributions by the shareholders. The Company is funding the pre-delivery construction schedule with respect to three and a half of these vessels, for which bank debt financing commitments have been secured, including pre-delivery as well as post delivery financing.

Moreover, the Company and Glencore International AG (through wholly-owned subsidiaries) have entered into an equal partnership joint venture, which on July 8, 2010, took delivery of one newbuilding 47,000 dwt double hull product/ chemical tanker, the Alpine Marina (sister ship to the Omega Duke), which was constructed at the Hyundai Mipo Dockyard in South Korea. The acquisition of the Alpine Marina was funded with previously secured bank debt financing and with equity contributions among the shareholders and will not be consolidated on the Company's balance sheet. The Alpine Marina is currently operating under a five-year time charter to ST Shipping with an excess earnings arrangement.

Financial Developments
The company is currently in advanced discussions with its lenders to extend the term of its loans under the Senior Credit Facility and the Junior Credit Facility beyond the current maturity of April 2011. Both the Senior and Junior Credit Facilities are non amortizing until their respective maturity. While both loans will mature in six months, the company believes it will reach a satisfactory outcome prior to the loans' maturity as the company is currently in negotiations to extend or restructure the company's debt.

As of June 30, 2010, the company was fully compliant with all its loan covenants. Also, as of June 30, 2010, the company's total debt, including pre-delivery advances for newbuildings, the debt on the Megacore Honami and other vessels under construction which will be deconsolidated in future quarters, was $359.1 million, while the outstanding balance under the Senior and Junior Credit Facilities was $242.7 million and $38.3 million, respectively.
 

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